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High Court Says it’s About the Known-Knowns, not the Known-Unknowns

11 September 2012

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High Court Says it’s About the Known-Knowns, not the Known-Unknowns

The High Court of Australia has now confirmed that when a union delegate was disciplined over misuse of email, his employer was motivated by the reasons it gave in evidence and not the employee’s role as a union official, despite having been aware of that role. The High Court has overturned an earlier majority decision of the Full Court of the Federal Court, and restores the orthodox approach in a welcome decision.

The decision significantly reduces the scope of employees to argue that unlawful considerations, such as a workplace right or industrial activity, must have been a part of an employer’s decision simply because a workplace right or industrial activity was part of the background facts.

Donald Rumsfeld might have had exactly this level of confusion in mind when he famously said:

[T]here are known knowns; there are things we know that we know. There are known unknowns; that is to say there are things that, we now know we don’t know. But there are also unknown unknowns – there are things we do not know, we don’t know.

What is a “general protections” breach?

The question for the courts was the fact that Barclay was a union officer and whether it was amongst the reasons for Bendigo TAFE imposing disciplinary action on him. The Fair Work Act 2009 (the Act) required the court to decide whether Bendigo TAFE disciplined Barclay “because of” reasons that included his union office.

The Act protects employees and contractors from adverse action that is motivated by unlawful reasons, including holding a union office, the existence or exercise of a “workplace right”, freedom of association or involvement in lawful industrial activities. It is a protection designed to ensure employees and contractors are not victimised by an employer for legitimate workplace activity. Because the reasons an employer takes action will be known only to the employer, the Act requires the employer to show that it was not motivated by an unlawful reason, reversing the usual onus of proof.

The facts

Barclay was employed as a senior teacher at Bendigo TAFE, and was an officer of the Australian Education Union (the Union). Barclay sent an email to all members of the Union employed by Bendigo TAFE suggesting that fraudulent documents were being produced in an audit being conducted for Bendigo’s re-accreditation.

Barclay had not reported the fraud allegations to his manager, and had no approval to send the email. When asked, he refused to give the names of the members who had “informed him” of the fraud allegations.

The Federal Court found that Bendigo TAFE’s CEO:

… provided convincing and credible explanations of why it was that she took the steps that she did. [She] said that she had been extremely concerned by the statement that false and fraudulent documentation had been prepared for the purposes of the audit. She wished to establish whether or not this had occurred and immediately instituted an inquiry to establish whether there was any foundation for the allegation.

She adhered to her explanation … for calling on Mr Barclay to show cause why he should not be disciplined for circulating the e-mail. She said that she had determined to exclude him from … campuses and suspend his e-mail access because she did not want Mr Barclay on the premises while the auditors were there and because she did not want any other ‘loose allegations’ made inappropriately during the audit to the detriment of [Bendigo TAFE]. She maintained her denials of having acted against Mr Barclay for any reason associated with his union membership, office or activities.

This evidence was accepted by the Federal Court.

Federal Court appeal

Barclay lost his case before a single judge and appealed. On appeal, the majority of Full Court of the Federal Court set aside the initial decision, holding that:

the subjective intention of an employer is relevant but not decisive

the real reason for an employer’s conduct is not necessarily the reason that the employer asserts, and it may be conscious or unconscious and

the test is what motivated the conduct of the employer, not what the employer thought it was motivated by.

The majority of the Federal Court appeal bench in effect decided that whether Bendigo TAFE had been motivated by an unlawful reason was a Rumsfeld ‘known unknown’.

Bendigo TAFE had shown the union delegate role was not amongst the reasons its CEO had in her mind when deciding on the disciplinary action. However, it had not successfully showed that the union office could not have formed an unconscious reason (although how it could ever have convincingly done so remains unclear). The reverse onus of proof meant, to the Federal Court, that the union office had not been “disassociated” from the disciplinary decision (regardless of the CEO’s actual reasons), and this was fatal to Bendigo TAFE’s defence.

According to the Federal Court appeal bench, a union official could never take off his or her union hat to be regarded as simply an employee who had potentially engaged in misconduct, and disciplined accordingly.

High Court decision

The High Court has now said that the Federal Court appeal decision is wrong, and that it is the decision maker’s own evidence of his or her operative and immediate reasons which will be determinative.

If a decision maker’s own reasons for imposing adverse action on an employee are legitimate, and the evidence is believed, no breach of the Act will be established. It is not necessary for an employer to go further, in order to discharge the reverse onus of proof, by discounting (or “disassociating”) every possible unlawful reason.

The High Court decision shows that whether or not the reasons could have included unlawful considerations is not the right question. To use a Rumsfeldism, there is no need to confuse things by asking what you know you don’t know was a reason – the court should ask what you know you do know.

The High Court’s decision includes the following points:

there will be no legitimacy in the search for an “unconscious” reason, which the Federal Court had undertaken in the appeal decision

direct evidence of the decision-maker’s state of mind, intent or purpose will be crucial to establishing the employer’s reasons for imposing adverse action on an employee, and evidence comparing what the decision-maker would have done if an employee who was not a union official had engaged in the misconduct will be relevant

an employee’s union position and activity will not in and of itself be a factor which must have something to do with adverse action, or which can never be dissociated from adverse action and

an employer’s reasons that will be relevant are only those that are “operative and immediate” so that, for example, the mere fact that a decision maker is aware of past industrial activity by an individual will not make that activity a substantial and operative reason.

Other considerations

The Fair Work Act Review Panel recommended in its report released in early August that the Act should be amended to provide that the central consideration about the reason for adverse action be the subjective intention of the person taking the adverse action. Given the High Court’s decision, the Panel’s recommendation now has less relevance.

Although the High Court’s decision provides some comfort to employers, it does not reduce employers’ fundamental obligation to comply with the general protections under the Act. We recommend employers seek legal advice when adopting measures against employees that could be considered to be “adverse action”.